Market News

(Bloomberg) -- European natural gas prices snapped a five-session rally after China hit back at US tariffs with its own levies on a range of commodities — including LNG — possibly leaving more fuel available for European buyers.

Benchmark futures fell as much as 2.1% on Tuesday. With China’s measures targeting US oil and liquefied natural gas, among other goods, the retaliatory move will likely push buyers to resell shipments to importers elsewhere, including Europe.

China’s LNG importers have already been offloading a large chunk of their US volumes to other markets where prices are more attractive. Overall, seaborne flows to northwest Europe have increased recently, in part because colder weather and strong inventory withdrawals have sparked supply concerns and driven prices higher.

“On the margin it should push down LNG prices and therefore also TTF-prices in the EU as it becomes more attractive to divert LNG vessels to Europe instead of China,” said Arne Lohmann Rasmussen, chief analyst at Global Risk Management in Copenhagen, referring to benchmark Dutch futures traded on the Title Transfer Facility.

China’s announcement came moments after President Donald Trump imposed a 10% tariff on goods from Beijing. The US leader has been preoccupied with his country’s steep trade deficits with partners, and has been clear about his intention to use the nation’s energy-superpower status to balance the equation.

Earlier, he pushed back planned levies on Canada and Mexico by a month after the nations agreed to take tougher measures to combat migration and drug trafficking. He has also threatened to hit the European Union.

Worries about the global trade environment are adding uncertainty to an already volatile market. European gas prices have surged recently as the region’s inventories are depleting more rapidly than usual this winter, fueling fears that restocking may be a challenge ahead of the next heating season.

Bloomberg Intelligence senior analyst Patricio Alvarez said European gas prices could soon test €55 a megawatt-hour as uncertainty over tariffs exacerbate a tightening supply-demand balance. For now, China’s retaliatory measures could “ease competition for spare cargo,” he said.

Dutch front-month futures, Europe’s gas benchmark, fell 1.5% to €53.01 a megawatt-hour at 9:06 a.m. in Amsterdam.